THE man who created a spending formula that costs Merseyside £500m a year wants his name taken off it - because he is so embarrassed by it.

Lord Barnett devised the Government spending formula that favours the Welsh, Scots and Northern Irish when he was a Treasury minister in the 1970s

Under the so-called Barnett Formula, the North West, England's second poorest region, receives around £400 per person less than Scotland in Government spending.

It means Merseyside, with a population of 1.36m, would receive in excess of £500m more every year, if it enjoyed the same funding as the Scots.

Meanwhile, Cheshire politicians blame the formula for contributing to the county losing out £115m compared with neighbouring Welsh authorities.

Labour peer Lord Barnett, speaking in the House of Lords, told ministers his formula was unfair to the English regions and accused them of refusing to change it for fear of anger North of the border.

Demanding a review, he said: "If that is not possible, will you consider asking the chief secretary to at least change the name of the formula? It is a great embarrassment to have my name attached to so unfair a system, especially as, when I introduced it, it was going to last only a year.

"It has now lasted more than 20 years, because successive governments have failed to deal with it for fear of upsetting the Scots."

Calls to scrap the Barnett Formula have grown in recent years since devolution gave the Scottish Parliament the right to impose its own "tartan tax" - an option it has rejected.

Most critics have demanded a spending settlement based on need, rather than one crudely calculated according to population size. But the Government has insisted better competitiveness - rather then a higher injection of public spending - is the key to closing the north-south divide.

And it has argued that Scotland's share of the cake under the controversial formula is already falling because of a declining population.

Cynics have suggested that scrapping Barnett would revive protests north of the border that the proceeds from Scottish oil are still flowing into London's coffers. Government whip Lord McIntosh joked that he would try never again to refer to the formula by its accepted name.

But he confirmed the Government had no plans to change the way it operated - or to fund the proposed North West elected assembly in a similar way.

Lord Newby, a Liberal Democrat peer, predicted that this year's London endum would lead to pressure for the formula to be extended to regions such as the North West.